Severance Agreement - Reader's Digest Association Inc. and Barbara J. Morgan
April 1, 1996
Mrs. Barbara J. Morgan
Senior Vice President and Editor-in-Chief,
Books and Home Entertainment
The Reader's Digest Association, Inc.
Pleasantville, NY 10570-7000
Dear Barbara:
This letter serves to confirm those payments and benefits
that you will receive, subject to and in accordance with the
terms and conditions of this Agreement in connection with a
termination of your employment with the Company.
1. Termination of Employment
1.1 The Company may terminate your employment at any time,
with or without stated reason. You shall receive the
benefits provided hereunder upon the termination of
your employment by you for "Good Reason," as defined in
Section 1.2, or the termination of your employment by
the Company, unless such termination is for "Cause," as
defined in Section 3.1 of the Severance Plan. Any
termination by you shall be communicated by written
Notice of Termination indicating the termination
provision in this Agreement relied upon, if any, and
the Date of Termination; provided that the Date of
Termination shall in no event be earlier than 10
business days after the date on which such Notice of
Termination is effective pursuant to Section 15 hereof.
1.2 For purposes of this Agreement, "Good Reason" shall
mean the occurrence of any of the following without
your express written consent:
1.2.1 the assignment to you without your written
consent of any duties materially inconsistent
with your then current position, duties,
responsibilities and status with the Company,
or a material change or a substantial
diminution in your then current authority,
reporting responsibilities, titles or
offices, or removal from or failure to re-
elect you to any such position or office
except in the event of a termination of your
employment for Cause, death, total disability
(as defined in The Reader's Digest
Association, Inc. Retirement Plan) or
mandatory retirement;
1.2.2 a reduction by the Company in your annual
base salary as in effect on the date of this
Agreement or as the same may be increased
from time to time, unless such reduction is
part of and consistent with a good faith
management-wide or Company-wide cost cutting
program, and then only if the percentage of
your reduction is no greater than that of the
other management personnel;
1.2.3 a relocation without your written consent to
an office located anywhere other than within
50 miles of your primary residence, except
for required travel on Company business to an
extent substantially consistent with your
then current business travel obligations;
1.2.4 the failure by the Company to continue in
effect any compensation plan or other fringe
benefit provided by the Company in which you
participate on the date of this Agreement
that, by itself or in the aggregate, is
material to your total compensation from the
Company, unless there shall have been
instituted a replacement or substitute plan
or fringe benefit providing comparable
benefits or unless such failure is part of
and consistent with a good faith benefit
discontinuance applicable to all of the
management personnel of the Company and then
only if the scope of the discontinuance with
respect to you is no greater than that of the
other management personnel; or
1.2.5 the failure of the Company to obtain a
satisfactory agreement from any successor to
the Company to assume and agree to perform
this Agreement. The Company shall use its
best efforts to require any successor
(whether direct or indirect, by purchase,
merger, consolidation or otherwise) to all or
substantially all of the businesses or assets
of the Company to expressly assume and agree
to perform this Agreement.
1.3 Any termination of your employment by you for "Good
Reason" shall be made within 180 days after the
occurrence of the "Good Reason."
2. Compensation Upon Termination
2.1 If your employment shall be terminated and you are
entitled to benefits under Section 1 of this Agreement
then, except as provided in Section 2.2 and 2.3, you
shall receive the following benefits for each year of
the Severance Period (as defined below):
2.1.1 the Company shall pay to you as severance pay
a total amount equal to the sum of
(a) your highest annual base salary in effect any
time during the 12-month period prior to the
Date of Termination plus
(b) the higher of the following:
(i) the highest amount paid to you under The
Reader's Digest Association, Inc.
Management Incentive Compensation Plan
(the "Annual Incentive Plan") during the
three plan years most recently ended
prior to the Date of Termination; or
(ii) the originally approved target amount of
the highest award, if any, under the
Annual Incentive Plan outstanding on the
Date of Termination, as such target
amount may have been increased prior to
the Date of Termination.
Any compensation received by you or granted
to you in lieu of an amount paid under the
Annual Incentive Plan for any one-year period
(whether in the form of restricted stock or
otherwise) shall be deemed to be an amount
paid to you under the Annual Incentive Plan
for purposes of this Section. Any
compensation receivable by you in lieu of an
amount payable under the Annual Incentive
Plan for any period shall be deemed to be an
additional target amount for purposes of this
Section. The amount of any non-cash
compensation received or receivable shall be
the greater of the fair market value of such
compensation on the date of award or the cash
amount that would have been received by you
in lieu of such non-cash compensation.
The aggregate amount of severance payable under
this Section shall be paid in equal installments
on a bi-weekly basis, commencing upon the Date of
Termination.
2.1.2 the Company shall maintain in full force and
effect, for your continued benefit for the
Severance Period, all welfare benefit plans
and programs or arrangements in which you
participated immediately prior to the Date of
Termination, provided that your continued
participation is possible under the general
terms and conditions of such welfare plans
and programs. In the event that your
participation in any such plan or program is
barred, the Company shall provide you with
benefits substantially similar to those which
you would have been entitled to receive under
such welfare plans and programs had your
participation not been barred.
2.2 If your employment is terminated by you for "Good
Reason" or if your employment is terminated by the
Company other than for "Cause," then the Severance
Period shall be the period of two years immediately
following the Date of Termination.
2.3 If your employment is terminated for Cause, the Company
shall pay you your base salary through the Date of
Termination, and the Company shall have no further
obligations to you under this Agreement.
3. Long-Term Incentive Plan Benefits
3.1 You shall have the right to exercise your outstanding
stock options and stock appreciation rights under the
1989 and 1994 Key Employee Long-Term Incentive Plans
(the "Long Term Incentive Plans") to the extent they
are exercisable or would become exercisable during the
Severance Period as if your employment with the Company
continued during the Severance Period. Such stock
options and stock appreciation rights shall continue to
vest during the Severance Period as if your employment
with the Company continued during the Severance Period
and, upon completion of the Severance Period, shall
vest and be exercisable as if your employment
terminated at that time by reason of either (a) an
involuntary termination without cause or a mutual
agreement (within the terms of the particular award) or
(b) retirement (within the terms of the particular
award), if applicable.
3.2 Your outstanding performance units, restricted stock
and awards (other than stock options and stock
appreciation rights) under the Long Term Incentive
Plans shall continue to be outstanding and payable
during the Severance Period as if your employment with
the Company continued during the Severance Period and,
if applicable, shall vest upon completion of the
Severance Period in accordance with the terms of the
award as if your employment terminated at that time by
reason of either (a) an involuntary termination without
cause or a mutual agreement (within the terms of the
particular award) or (b) retirement (within the terms
of the particular award), if applicable. Any such
award that is based on a period of employment shall be
payable on a prorated basis as if your employment had
continued during the Severance Period.
3.2.1 If any such award is subject to specific
performance goals and your employment is
terminated by you for "Good Reason" or your
employment is terminated by the Company other
than for "Cause," then the award shall be
payable to the extent such performance goals
are attained.
3.3 If any benefits due under Section 3 cannot be paid
under the existing or amended terms of an applicable
plan or award agreement, the Company shall pay you the
value of such benefits at the time they would otherwise
be payable if they were payable under such terms.
4. Retirement Plan Benefits
4.1 The Company shall pay to you an amount equal to the
difference between your monthly retirement benefit
payable under The Reader's Digest Association, Inc.
Retirement Plan (the "Retirement Plan"), the Excess
Benefit Retirement Plan of The Reader's Digest
Association, Inc. (the "Excess Benefit Retirement
Plan") and The Reader's Digest Executive Retirement
Plan (the "Executive Retirement Plan") and the amount
that would have been payable if your age and aggregate
periods of service under those plans included the
Severance Period. In addition, the Severance Period
shall be considered to be additional Credited Service
for all purposes (including vesting) under the
Executive Retirement Plan. Any amount payable under
this Section 4.1 shall be payable at the same time and
in the same form as such payments would have been made
under the Retirement Plan.
4.2 Upon completion of the Severance Period, if you are not
vested under the Retirement Plan, the Excess Retirement
Plan or the Executive Retirement Plan, you will receive
a lump sum payment in the amount of the equivalent
actuarial value (as determined under the Retirement
Plan) of pension credits that would have been earned
through the end of the Severance Period, without regard
to vesting, with any such payment to be made within 90
days of the end of the Severance Period.
5. Your participation in The Reader's Digest Employees
Profit-Sharing Plan and the Profit -Sharing Benefit
Restoration Plan of The Reader's Digest Association,
Inc. (the "Profit-Sharing Plans") ceases upon your
termination of employment with the Company. However,
you shall receive cash payments equal to the amounts
that would have been contributed to your account had
your employment with the Company continued for the
Severance Period, with payments to be made to you by
the Company at the time any contributions have been
made for participants in the Profit-Sharing Plans. In
addition, the Severance Period shall be considered to
be additional Credited Service for purposes of your
vesting in any amounts previously contributed to your
account under the Profit-Sharing Plans.
6. Any benefits payable under this Agreement shall be
reduced by the amount of any benefits paid under The
Reader's Digest Association, Inc. Severance Plan for
Senior Management or The Reader's Digest Association,
Inc. Income Continuation Plan for Senior Management.
7. The payment of any amounts or benefits under this
Agreement is expressly conditioned on the receipt by
the Company from you of a duly executed General Waiver
and Release of Claims in the form specified under the
Severance Plan, the repayment by you of any outstanding
advances or loans due the Company and the return by you
of all Company property.
8. Any reference to a specific plan in this Agreement
shall be deemed to include any similar plan or program
of the Company then in effect that is the predecessor
of, the successor to, or the replacement for, such
specific plan.
9. The Company may withhold from any benefits payable
under this Agreement all federal, state, local or other
applicable taxes as shall be required pursuant to any
law or governmental regulation or ruling.
10. In case of your death while any amounts are still
payable to you under this Agreement, the Company shall
pay all such amounts to your designated beneficiary or,
if none has been designated, to your estate as if your
employment had continued until the end of the Severance
Period.
11. The Company shall indemnify you and hold you harmless
from any and all liabilities, losses, costs or damages,
including defense costs and expenses (including,
without limitation, fees and disbursements of counsel
incurred by you in any action or proceeding between the
parties to this Agreement or between you and any third
party or otherwise) in connection with all claims,
suits or proceeding relating to or arising from a
breach or alleged breach of this Agreement by the
Company.
12. You acknowledge that (i) prior to executing this
Agreement, you had an opportunity to consult with an
attorney of your choosing and review this Agreement
with such counsel, (ii) you are executing this
Agreement knowingly and voluntarily and (iii) you
understand all of the terms set forth herein.
13. In the event the Company terminates your employment for
Cause and you dispute the Company's right to do so or
you claim that you are entitled to terminate your
employment for Good Reason and the Company disputes
your right to do so, a mediator acceptable to you and
the Company will be appointed within 10 days to assist
in reaching a mutually satisfactory resolution, but
will have no authority to issue a binding decision.
Such mediation must be concluded within 60 days of the
date of termination or claim to termination for Good
Reason. You agree that you will not institute any
legal proceeding relating to the matter until the
conclusion of such mediation. Should such mediation
fail to reach an acceptable conclusion and you are
successful in any litigation or settlement that issues
from such dispute, you shall be entitled to receive
from the Company all of the expenses incurred by you in
connection with any such dispute, including reasonable
attorney's fees.
14. Acts Detrimental to the Company
14.1 You agree that you will not do any of the following
during the Severance Period:
14.1.1 commit any criminal act against the Company
or any act that would constitute "Cause;"
14.1.2 disclose any information likely to be
regarded as confidential and relating to the
Company's business;
14.1.3 solicit the Company's employees to work for a
competitor of the Company; or
14.1.4 perform any act detrimental to the Company or
its employees, including, but not limited to,
disparaging the Company, its senior
management or its products.
14.2 You agree that any breach or threatened breach of
Section 14.1 shall entitle the Company to apply for and
to obtain injunctive relief, which shall be in addition
to any and all other rights and remedies available to
the company at law or in equity.
14.3 All of your rights and benefits under this Agreement
shall cease upon any breach by you of Section 14.1 of
this Agreement.
15. Miscellaneous
15.1 Notices and other communications provided for herein
shall be in writing and shall be effective upon
delivery addressed as follows:
if to the Company:
The Reader's Digest Association, Inc.
Reader's Digest Road
Pleasantville, NY 10570-7000
Attention: Senior Vice President, Human Resources
with a copy to
The Reader's Digest Association, Inc.
Reader's Digest Road
Pleasantville, NY 10570-7000
Attention: General Counsel
or if to you, at the address set forth above,
or to such other address as to which either party shall
give notice in accordance with the foregoing.
15.2 This Agreement shall be binding upon and shall inure to
the benefit of the parties hereto and their respective
successors and assigns; provided, however, that this
Agreement may not be assigned by either party without
the consent of the other party.
15.3 Any provision of this Agreement that is prohibited or
unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such
prohibition or unenforceability without invalidating
the remaining provisions of this Agreement or affecting
the validity or enforceability of such provision in any
other jurisdiction.
15.4 This Agreement constitutes the entire understanding of
the parties hereto with respect to the subject matter
hereof and supersedes any prior agreements, written or
oral, with respect thereto.
15.5 This Agreement may be amended or modified only by a
written agreement duly executed by both of the parties
hereto.
15.6 This Agreement shall be governed by and interpreted in
accordance with the laws of the State of New York
applicable to contracts executed in and to be wholly
performed within that State.
Very truly yours,
The Reader's Digest
Association, Inc.
By
Name: Joseph M. Grecky
Joseph M. Grecky
Title: Senior Vice President,
Human Resources
Agreed to and accepted as of 4/25/96:
Name: Barbara J. Morgan
Barbara J. Morgan